DUBLIN: Recouping €13bn of back taxes from Apple has left the maker of the iPhone facing an additional $1.7bn tax bill in the US, according to analysis by the Financial Times. US tax reforms passed in December apply a one-off tax on unrepatriated foreign earnings of American multinationals, a charge that would have been substantially lower for the world’s biggest company had Ireland recovered €13bn in tax as ordered by the European Commission in August 2016. As a result of the US tax overhaul, Apple expects to pay a total of $38bn in US tax on its offshore foreign earnings, which by September last year included an overseas cash pile of $252bn.
However, that calculation would have differed had the US group paid Ireland its back taxes in the 16 months since Margrethe Vestager, the EU’s competition commissioner, found Apple’s tax deal was too good and amounted to illegal state-aid of €13bn plus interest. Had the US group paid Ireland or even put the money into an escrow account by the end of 2017, its overseas cash and earnings would have been lower, cutting its one-off US tax by $1.7bn. The commission decision was directed to Dublin, which typically would have four months to recover the illegal support.
Given the record size of the levy the commission allowed more time, but in October Mrs Vestager lost patience and sued Ireland in European courts for “failing to implement the decision”. Some senior EU officials question the motives for the delays. Ireland insists they are due to the complexity of agreeing investment objectives with Apple and establishing an escrow account for the money while Ireland’s and Apple’s appeals against the commission decision work through the courts over coming years.
The payment is more than a quarter of Irish 2016 tax revenue of $47.95bn and Dublin is keen to ensure it is not on the hook for any investment losses should the ruling be overturned. Irish officials said the tendering processes for the fund manager and escrow agent are nearly complete and they expect to collect the funds by the end of September. The commission said on Thursday that Ireland must recover the illegal state-aid: “Nothing has changed in that regard.” Apple declined to comment. Using public financial statements and US tax authorities’ guidelines, the FT compared the US repatriation tax bills under two scenarios: one where the $15bn (€13bn) was paid in the year following the EU decision and one where the bill was paid in 2018. When Apple paid Dublin in 2018 rather than 2017, it owed $1.7bn more in US tax and also delayed when it could use the nearly $5bn tax credit to reduce its other US tax.
